Nigeria: As CBN Simplifies Process for Accessing Forex - AllAfrica - Top Africa News
The introduction of electronic application for foreign exchange is expected to simplify the process of accessing the greenback.
The recently introduced electronic application for foreign exchange (forex) has been described as a major tool to help ease access to forex for travelers, operators of SMEs, those paying school fees, health bills and others that need the greenback for genuine transactions.
With the new policy, Nigerians are now able to apply for forex online, with the deployment of the electronic Form 'A' which has expedited applications for PTA/BTA, medicals, education, and other remittances.
The new policy was disclosed in a circular titled, "Automation of Form 'A' on the Trade Monitoring System," introduced last month, that was signed by CBN's Director Trade and Exchange Department, Dr. Ozoemena Nnnaji.
According to the central bank, all hard copies of Forms 'A' created on or before November 2, 2021 (before the start of the e-Form 'A') must be used within 15 working days of the Form's creation.
A Form 'A' is an application form designed by the CBN to pay for service transactions (invisible trade).
The form allows customers to purchase forex at the CBN or interbank rate to make payments for eligible services as predetermined by the foreign exchange manual.
The e-Form 'A' replaced the hardcopy since November 30, 2021.
According to the central bank, that customers were expected to pay a charge of N5,000 as fee per declaration of e-Form 'A'.
The circular reads: "This is to inform all authorised dealers and the general public of the deployment of e-Form 'A'. Accordingly, the e-Form 'A' shall replace the hard copy of Form 'A' for invincible transactions (PTA/BTA, medicals, education, other remittances etc.) with effect from November 30, 2021.
"Consequently, all authorised dealers are required to ensure that the processing of Form 'A' shall only be done electronically on the Trade Monitoring System accessible at www.tradesystem.gov.ng.
"The general public is required to obtain a valid Bank Verification Number (BVN) from their authorised dealer banks. The BVN is a prerequisite for customers to access the Trade System for e-Form 'A' application.
"The e-Form 'A' is web-based and allows the general public to initiate the Form from their offices/homes and submit same to the authorised dealer bank.
"A charge of N5,000 as fee per declaration of e-Form 'A' is applicable with effect from November 30, 2021, and henceforth. There will be a direct debit from the processing bank's current account for each declaration which should be recovered the charge on the customer by the bank. However, customers for the e-Form 'A' should be separated from other bank charges.
"All hard copies of Forms 'A' established on or before November 2 2021 (prior to the commencement of the e-Form 'A') shall be utilized within 15 working days of the establishment of the Form.
"For the avoidance of doubt, all established hard copies of Forms 'A' for which disbursement had not been made within the transition period of 15 working days shall be deemed cancelled.
"All authority dealer banks are enjoined to inform their customers of the development for compliance."
Analysts noted that the policy would help ease accessibility of forex and related services to Nigerian bank customers.
In recent times, there has been a halt to the rapid depreciation seen in the black market.
The CBN Deputy Governor, Corporate Services Directorate, Mr. Edward Adamu, who disclosed this, noted that, "the initial panic-driven depreciation at the parallel market has gradually given way to real market forces."
He added: "Against the backdrop of tight liquidity management and the recent modification of the forex management strategy, the naira exchange rate has remained stable since the last adjustment at the Investors and Exporters (I E) window.
"Apparently, the revised forex management strategy, which excludes Bureau De Change (BDCs) from direct sales, is working as a substantial share of forex demand has migrated to the deposit money banks' window. We should expect this pattern to continue in the coming months as confidence in the modified framework grows."
CBN Governor, Mr. Godwin Emefiele, had said the apex bank was ready to approve legitimate forex demand that exceeds the approved transaction cap if such applications meet stipulated requirements.
According to him, the CBN was ready to approve requests from commercial banks to go beyond the caps if proven that the extra demand for FX was for legitimate purposes.
He had said: "Indeed, I want to put it on record; if the amount you want is even above the limit that is recognised and we find that the reason you are making those demands is legitimate, your bank will speak to us and we will give you more than what is even the limit."
He had also insisted that the Investors and Exporters Window of the central bank remains the major market which anyone seeking to procure or sell foreign exchange should patronise.
While urging customers to go to their banks for their forex needs, the CBN Governor had said, "The only exchange rate that I recognise today in the Nigerian foreign exchange market which is the dominant market remains the Investors and Exporters (IE) window."
Emefiele, recently reiterated the need for extensive structural reform this year to fast-track the country's economic growth.
He stressed that extensive structural reforms were required to ensure that long-run paths of growth surpass potential.
The CBN governor noted that as business sentiments brightened, following the various supply-side supports by the apex bank and orderly implementation of macroeconomic policies, he expected domestic fragility to diminish with benign knock-on effects on welfare and livelihood.
He said, "Our medium-term goal is to fast-track growth above historic average. Economic activities may reach pre-pandemic levels if the resilience of non-oil activities (especially agriculture and manufacturing sectors) are given continued impetus."
A member of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), Prof. Mike Obadan, in a recent article, explained that forex is relevant in the context of world trade, payments and capital flows into and out of a country. This, he pointed out forms a major component of a country's external reserves which according to the International Monetary Fund (IMF) consists of "official public sector foreign assets that are readily available to, and controlled by the monetary authorities, for direct financing of payments imbalances, and directly regulating the magnitude of such imbalances, through intervention in the FX markets to affect the currency exchange rate and/or for other purposes".
Owing to this, the Central Bank of Nigeria Act, 2007, Section 24, mandates the Bank to maintain external reserve assets in gold coin or bullion, balances in banks outside Nigeria, foreign short-term treasury bills and medium-term securities, Special Drawing Rights (SDR) of the IMF, etc.
The CBN Act 2007 enjoins the Bank to, "use its best endeavour to maintain external reserves at levels considered by the Bank to be appropriate for the economy and the monetary system of Nigeria."
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"In light of this, the CBN has strived to carry out this mandate by using supply and demand management strategies, particularly, forex conservation and control measures as well as measures to ensure adequate supply of foreign exchange.
"This is particularly so because forex is a scarce resource that needs to be efficiently managed if the country is to achieve macroeconomic stability, and avoid chronic balance of payments and external reserve problems.
"It must be stressed that it is only forex, in the form of convertible currencies or internationally acceptable currencies, and not naira, which can be used for international transactions," Obadan added.
The Professor of Economics and Chairman, Goldmark Education Academy, noted that for some time now, there have been issues about forex in the country, which predates the present administration, stating that over the years, genuine efforts of the federal government to achieve a headway on these have tended to be undermined by exogenous shocks in the past five years which pushed the economy into recession in 2016 and 2020.
Therefore, in order to stabilise the forex market and reduce the pressure on the naira exchange rate, there is need to move away from the country's flawed pattern of economic management of the past.
Obadan, also called for a revival and rebuilding of the productive sectors of the economy to achieve higher capacity utilisation and productivity, and competitive manufactured exports; strong government encouragement of local refining of petroleum products for both domestic consumption and exports; as well as strong and effective surveillance of the forex market by the monetary authority to check round-tripping of forex from the deposit money banks to the parallel market.